The green part of the equation tells us Hourly Productivity. Data for it are almost non existent for Croatia. There was none on the Crostat or even Eurostat. Hourly productivity table there is empty for Croatia. The other 3 blue terms show us the labor market situation, i.e. what is lacking there.

All the data I used I found on the Crostat, Eurostat and HNB websites. Some I simply adjusted to encompass broadly, like the unemployment rate. For example, using the information on the HNB site we have two unemployment rates: Administrative unemployment rate (16.9% in 2006) and ILO Survey rate (11.8% in 2006) Average is 14.35%. But using any of the other 2 numbers doesn’t give us a markedlydifferent conclusion. Besides, the official unemployment number developed by the government and widely used is the higher 16-17%. I guess I am giving them (politicians or whoever) a break by using the lower figure.

Maybe I should explain these terms more precisely. GDP/Hours worked is called hourly productivity; how much GDP is produced for every hour worked in the economy. GDP figure I used is $40 bill. I rounded it between the Economist Inteligence Unit estimate of $42.8 bill. (2006) and Crostat’s $38.5 bill. (2005) Dividing GDP with total hours worked in an economy gives $13.945 (approx. $14) hourly productivity.

Hours Worked/Employment is the average hours worked per person employed in a year.
For Croatia, hours worked in an economy are hard to come by. Hourly productivity is non-existent on the Eurostat website and no data on hours worked in a year is easily available on the Crostat website. I did find this information on the Crostat. It gives theAVERAGE MONTHLY ACTUALLY WORKED HOURS PER EMPLOYEE in Croatia, which are 151 h. Multi. by 12 we get 1812 average annual hours worked per person employed. Further, that makes 2 868 396 000 hours worked in the economy.

Employment/Labor Force is the employment rate; it shows the proportion of individuals that have a job and who want one. To be counted as part of the Labor Force you need to be of legal age, have a job or want a job, i.e. actively seeking employment. Those who are neither employed and do not actively seek work are not part of the Labor Force. Unemployed are those who are willing to work and are actively seeking employment but don’t have a job. Unemp. Rate of 14.35% gives us the employment rate of .8565.
(Employment rate= 1 – Unemp. Rate)

Labor Force/Population is the participation rate, that is part of the population that is seeking a job and wish to be a part of the Labor Force. Why some do not want to be a part of the labor force depends on economic, demographic and cultural factors. The number here is .40 or 40% of the population.

Plugging the above underlined numbers back in the formula gives us:

$14 x 1812 x 0.8565 x 0.40 = $8691 i.e. the GDP/Capita.

The data for itself says nothing new, nothing that we don’t already know and yet it can speak volumes. As I said before, the last 3 terms in blue give us the information about the labor market. Croatians works 1812 hours on average a year, which is a good, if not even too high a number. Compared to western European countries Croatians work much longer. We have a lower participation rate and of course a relatively very low employment rate. Improvements in both would improve the labor market picture which would raise the the GDP/capita.

Koreans for example work around 2400 hours a year on average and have relatively low productivity. The data for 2001 is $13.66 GDP/hour, similar to Croatian today. But higher participation and employment rates allow Koreans to have higher GDP/capita. However, there is a ceiling to how low unemployment can go. In order to keep growing Koreans will have to raise their productivity.
For Croatia too the issue is the very low hourly productivity. Raising productivity is the pretty much the only way to achieve long run sustainable growth and higher standard of living. It allows us to produce more with less. I won’t go into the pension obligations being promised that will be hard to honor without a significant productivity increase. Yet, we don’t hear a single politician talking about the productivity. Rarely one that talks precise and specifically how to lower the unemployment …. Knock Knock … Where are you?